On Feb. 1, 2017, Facebook Inc. (FB, Financial) reported strong earnings performance for fourth-quarter and full-year 2016. Net incomes and diluted earnings per share more than doubled from comparative values in 2015. As the company has robust financial strength and profitability, Facebook has high value potential for early 2017.
Brief summary of company earnings performance
Facebook, one of the world’s most popular social networking sites, offers products like Instagram, Messenger, WhatsApp and Oculus. During fourth-quarter 2016, the company generated $8.809 billion in revenue and $3.568 billion in net income. Revenues increased 51% from the prior-year quarter while net income soared 128%. For full-year 2016, Facebook doubled its operating income and increased its net income 177% from full-year 2015 figures.
Facebook had strong earnings performance due to its increasing customer base. The social networking company had 1.23 billion daily active users on average for December 2016 and 1.86 billion monthly active users on average as of end of year 2016, both representing a year-over-year increase of over 17%. Most of Facebook’s products, including Instagram and Messenger, are increasingly popular among millennials, driving the company’s ability for strong advertisement opportunities.
CEO Mark Zuckerberg stressed the importance of connecting the world and bringing people together. Although the company had a strong 2016, Zuckerberg said Facebook’s management still has “a lot of work ahead” for 2017. The company had increasing advertising revenues for fourth-quarter and full-year 2016, primarily due to increasing video ads on Messenger, Instagram and Oculus. For 2017, Facebook’s management expects to further optimize the video ads and target these ads to its users.
Company has strong financial outlook for 2017
The potential for higher advertisement revenues and increasing customer base contributes to Facebook’s strong business operation. For fourth-quarter 2016, the company reported an operating margin of 52%, outperforming fourth-quarter 2015 operating margin by 8%. Facebook’s profit margins outperform over 92% of global Internet content and information companies. Additionally, Facebook’s net margin, return on equity and Greenblatt return on capital are close to a historical high.
The company has no debt , a Piotroski F-score of 7 and an Altman Z-score of 43.37, suggesting that Facebook seldom faced financial distress throughout its history. Based on these financial metrics, Facebook’s financial strength rank is a perfect 10.
Facebook’s stock price closed at $133.23 per share Wednesday, up 2.23% from its previous close of $130.32 per share.
Manning & Napier Advisors Inc. increased their Facebook position by 20.91% during fourth-quarter 2016. The guru owns 3,771,363 shares as of Dec. 31, 2016.
Disclosure: No position in Facebook.
